Friday, December 09, 2005

Progressive institutions finally wake up to peak oil

It's good to see the larger progressive institutions finally acknowledging the problem of peak oil.
From American Progress:

PEAK OIL -- WHAT AND WHY: Why isn't it sustainable, if there's so much oil underground? Therein lies the notion of "peak oil": after about half the oil has been extracted from a field, production rates start to go down. "There's still oil left, but declining pressure, exhaustion of the best oil pockets, and increasing contamination bring it to the surface ever more slowly." And ever less profitably. In other words, the problem isn't that the world will run out of oil -- it's that, at one point, it will no longer be profitable to extract it. So no one will. This theory, it's worth noting, is neither new nor controversial. In 1956, M. King Hubbert of Shell Oil used it to predict that U.S. oil production would peak in the early 1970s. His analysis was disregarded, if not derided. U.S. oil extraction peaked in December 1970.

BUT IS IT HAPPENING GLOBALLY? The short answer is yes. "All or nearly all of the largest oil fields have already been discovered and are being produced. Production is, indeed, clearly past its peak in some of the most prolific basins," the U.S. Energy Information Administration said in a recent report. The NETL report likewise detailed "a number of trends that suggest the world is fast approaching the inevitable peaking of conventional world oil production." The natural follow-up question -- when will the global peak occur? -- is inherently speculative, and thus quite contentious. (The U.S. government puts the date at 2037; "most mainstream analysts" suggest it will come earlier, "in 10 or 15 years at around 100 million bpd.") But the question is also somewhat academic. "No matter who's right, what we can say with some certainty is that even if oil production continues to grow, it will grow slowly, which means that supply will barely keep up with rising demand. In other words, it's likely that we're now in a permanent state of near zero spare capacity, which in turn will lead to an increasingly unstable world."

THE HIGH PRICE OF INACTION: The impact of an actual shortfall of supply would be immense. The DoE states plainly, "The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary." According to the New York Times, "If consumption begins to exceed production by even a small amount, the price of a barrel of oil could soar to triple-digit levels. This, in turn, could bring on a global recession, a result of exorbitant prices for transport fuels and for products that rely on petrochemicals -- which is to say, almost every product on the market."

I hate to break it to the DoE, but the game is over. We can prepare as best we can, but if anyone thinks that the world as it is today will continue, they are in denial.